Building resilient charities: Strengthening governance and risk management for financial stewardship

"Charity trustees are the people who control and are legally responsible for managing a charity."

- Charities Regulator - Charities Act 2009

Charities today operate in an increasingly complex environment. Economic volatility, regulatory changes, cyber threats, and reputational risks pose significant challenges to their long-term sustainability. To navigate these challenges, charity governance and risk management frameworks must be robustly adopted. These frameworks are essential for effective wealth and financial stewardship, ensuring that resources are protected, strategically deployed, and aligned with the charity’s mission.

A well-structured governance framework: The backbone of trust and strategy

Governance refers to the systems and processes through which organizations are directed and controlled. For risk management for charities, strong governance is critical to maintaining public trust and delivering impact.

Figure 1: Key governance pillars 

Source: Davy

This includes conducting gap analysis and documenting action plans. Trustees are expected to understand how these laws apply to their charity’s specific activities, such as fundraising, child protection, or service delivery.

Investment Governance is also a vital part of broader organizational governance. As we’ve previously highlighted, best practice begins with an Investment Policy Statement (IPS) a document that sets out the charity’s investment objectives, risk tolerance, ethical considerations, and decision-making processes. An IPS helps trustees and charity executives:

• Clarify their fiduciary responsibilities.
• Align investment decisions with the charity's mission.
• Demonstrate accountability and transparency to stakeholders.

We work closely with charities to develop tailored IPS frameworks, ensuring that governance structures support long-term financial sustainability and compliance with regulatory expectations. 

Risk management: Preparing for the unexpected

Risk management for charities involves identifying, assessing, and mitigating threats that could impact a charity’s mission or assets. A proactive approach enables charities to respond confidently to emerging risks.

Figure 2: Essential risk management practices

Source: Davy

In Ireland, the regulatory landscape for charities has evolved significantly in the past three years. Under the Charities Governance Code Ireland, charities are now required not only to identify all applicable laws but also to map their specific obligations under each one. This means going beyond listing legislation — charities must understand how laws like the Charities Act 2009, Charities (Amendment) Act 2024, Companies Act 2014, and GDPR apply to their unique activities, whether that’s fundraising, working with children, or delivering social care.

In plain terms, this means trustees and charity executives must be able to show:

• What laws apply to their charity.
• What duties those laws impose.
• How the charity is meeting those duties.
• What gaps exist - and how they're being addressed.

This level of detail is now expected as part of good charity governance. It’s not just about avoiding penalties it’s about protecting the charity’s reputation and ensuring it can continue to operate effectively.

How can we help

At Davy, we are well-positioned to support charities in navigating this complexity. Our institutional consulting services include:

• Scenario planning to anticipate financial and regulatory risks.
• Reserve policy reviews to align financial strategy with governance standards.
• Sustainability and compliance advisory to ensure investment decisions and operational practices meet evolving legal and ethical expectations.

By working with our experienced team, charities can build confidence in their governance and risk frameworks and focus more energy on delivering impact. 

Financial stewardship: Integrating governance and risk

Financial stewardship is not just about protecting assets it’s about using them wisely to maximize social impact. This requires a symbiotic relationship between governance and risk management.

Figure 3: Strategies for resilient stewardship

Source: Davy

Our guidance on cash management emphasises segmenting reserves into liquidity tranches; strategic, reserve, and operating to balance access, security, and return. This approach also highlights the importance of a board-approved treasury policy that aligns with mission and risk appetite. 

Traditionally, our sustainability planning framework encourages institutions to align investment strategies with long-term mission goals, incorporating ESG (Environmental, Social and Governance) principles and scenario planning to ensure resilience. 

Practical steps for Trustees and CFOs

To embed resilience, charities should consider the following actions:

• Establish a risk committee with expertise in emerging threats.
• Provide ongoing training for staff and trustees on governance and risk.
• Create clear reporting channels for concerns or incidents.
• Update risk registers at least annually.
• Foster a culture of accountability where stewardship is everyone's responsibility. 

Charities are entrusted with significant resources and public confidence. By strengthening governance and embedding robust risk management, they can adapt to change, withstand shocks, and deliver lasting impact. Good stewardship is not just about protecting today’s assets it’s about securing tomorrow’s mission.